How does Southern Steer determine when an account receivable is considered a bad debt?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable will be presented at the net amount expected to be collected by using an allowance for credit losses. The Company will consider a receivable to be a bad debt once it has been in collections for more than ninety days. At September 30, 2024 and 2023, accounts receivable was as follows:
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, Southern Steer considers an account receivable to be a bad debt once it has been in collections for more than ninety days. Accounts receivable are presented at the net amount expected to be collected using an allowance for credit losses. This accounting practice affects how Southern Steer reports its financial health.
For a prospective franchisee, this means that if Southern Steer has receivables outstanding for more than 90 days, they are classified as bad debt. This impacts the overall financial picture of the franchisor, potentially affecting the perceived stability and profitability of the Southern Steer franchise system. Franchisees should pay attention to the accounts receivable and bad debt figures in Southern Steer's financial statements to assess the financial health of the company.
Understanding how Southern Steer manages and accounts for its receivables can provide insights into the efficiency of its billing and collection processes. A high level of bad debt could indicate issues with the creditworthiness of franchisees or the effectiveness of Southern Steer's collection efforts. Therefore, a prospective franchisee should inquire about the typical collection periods and the measures Southern Steer takes to minimize bad debt. This information can be valuable in assessing the overall financial risk associated with investing in a Southern Steer franchise.